provides that a member firm controlled by, controlling or under common control with the issuer of any security must, before entering into any contract with or for a customer for the purchase or sale of such security, disclose to the customer the existence of such control; if such disclosure is not made in writing, it must be supplemented by written disclosure at or before the completion of the transaction.

Which of the following would be acceptable to do for a Regulation D, Rule 505 private placement?

A)Hire non-registered finders to help place the securities with investors
B)Place an advertisement in the newspaper for the private placement
C)Telling investors that the securities will be able to be re-sold at a later date
D)Offer assurances to investors of a return on investment

A)Hire non-registered finders to help place the securities with investors

Issuers of private placements under Rule 505 cannot rely on public advertising to find investors. Issuers may not offer assurances to investors of a return on their investment and they may not tell investors that the securities will be able to be resold at a later date. Issuers may hire non-registered finders to help place the securities with investors, but using a FINRA registered placement agent is more generally preferred.

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Which of the following documents needs to be filed when securities are offered to company employees through employee benefit plans?A. S-8
B. S-1
C. S-5
D. S-3

A. S-8

An S-8 registration statement is filed with the SEC to register securities that are to be offered to company employees through employee benefit plans.

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When does a syndicate account have to be finalized and closed?
A. Within 30 days from the public offering date
B. Within 30 days from the last security being sold at the public offering price C. Within 90 days from the syndicate settlement date
D. No official date

C. Within 90 days from the syndicate settlement date

Syndicate accounts have a special settlement date. Syndicates are groups of underwriters that help issuers sell and distribute their securities in a primary public offering. The syndicate settlement date is the date when the issuer delivers the securities to the syndicate members. The manager of the syndicate account must finalize the syndicate accounts with the other syndicate members within 90 days following the syndicate settlement date. The final settlement includes an itemized statement of syndicate expenses to add to the purchase price of the new issue. These expenses will be divided on a pro-rata basis among the syndicate members.

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Which of the following is not required on a trade blotter? A. Where the trade occurred (the name of the exchange)
B. What security was traded (the name of the security)
C. When the trade occurred (the trade date)
D. Who the securities were bought from or sold to (the name of the counterparty)

A. Where the trade occurred (the name of the exchange)

A broker-dealer must keep blotters (or other records of original entry) that contain an itemized daily record of all purchases and sales of securities, all receipts and deliveries of securities, all receipts and disbursements of cash and all other debits and credits. The blotters must show the account for which each such transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date, and the name or other designation of the person from whom purchased or received or to whom sold or delivered.

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An issuer makes a Regulation A offering, then later makes a Regulation D offering. The issuer wants to avoid having the Regulation A offering be subject to the rules of Regulation D. How can the issuer make sure that the Regulation A offering will not be integrated with the Regulation D offering?
A. Only allow institutional investors to participate in the Regulation A offering B. Wait for over six months after the completion of the Regulation A offering before making the Regulation D offering
C. Make sure that the combined public offering price of the two offerings totals less than $5 million
D. File a Non-Integrated Offering Request Form with the SEC and receive approval

B. Wait for over six months after the completion of the Regulation A offering before making the Regulation D offering

Regulation A offerings may be integrated with other offers that occur within a 6 month period after the offering. Regulation A offerings are not integrated with offers that occur prior to the offering or more than 6 months after the offering. Note that integration is not the same as aggregation. Integration means that offerings are integrated such that all rules and stipulations of the integrated offerings must be met. Aggregation refers to the total dollar amount from any offerings. All Regulation A offerings must be aggregated over a 12 month period.

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For a $4 million stock offering under Rule 505 of Regulation D,
A. an issuer may advertise the offering in national newspapers
B. must deliver a red herring prospectus to each prospective investorC. may not sell shares to more than 35 non-accredited investors
D. must wait until the SEC approves the registration statement for the offering

C. may not sell shares to more than 35 non-accredited investors

Under Rule 505, the issuer may not sell to more than 35 non-accredited investors. As an exempt offering, the issuer would not file a registration statement or prospectus. For the offering to be exempt under Regulation D, there can be no public solicitation or offering.

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Which of the following would be considered a "fixed price offering," assuming the securities are offered at a stated public offering price or prices?
A. An offering of redeemable shares of a registered investment company priced relative to its NAVB. Corporate securities offered in a follow-on offering
C. A municipal securities offering
D. A government securities offering

B. Corporate securities offered in a follow-on offering

"A fixed price offering" is the offering of securities at a stated public offering price or prices in a US state or territory. The securities may be registered or unregistered. However, the term does not include offerings of "exempted securities," "municipal securities," or redeemable securities issued by registered investment companies which are offered at prices determined by the net asset value (NAV) of the securities. A fixed price offering is subject to FINRA Rule 5141, which stipulates that members of the selling group or selling syndicate must not sell the security to other persons at a price below the stated public offering price ("reduced price").

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On what form would your find a Regulation FD disclosure?
A. Form 10K
B. Form 10QC. Form 8K
D. Form K1

C. Form 8K

If an issuer makes a disclosure of public, material information it must notify the public of this information under Regulation FD. This is typically reported on Form 8-K. If the selective disclosure is intentional, the public disclosure must be made simultaneously. If the selective disclosure is accidental, the 8-K must be filed promptly (within 24 hours of the disclosure).

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To be listed on the over-the-counter bulletin board (OTCBB):
A. a company must file quarterly financial statements with NASDAQB. the company must remain current in making periodic filings with its regulatory authority.
C. a company may only list its common stock
D. a company must have at least 250 existing shareholders

B. the company must remain current in making periodic filings with its regulatory authority.

The OTCBB does not have listing standards and NASDAQ does not require quarterly financials to be filed in order to be listed on OTCBB. However, for a company's securities to be eligible to be listed on OTCBB, the company must be current with their filings with the SEC/regulatory authority. Securities listed on OTCBB include more than just common stock -- for example, warrants, ADR's and direct participation programs may also be listed on the OTCBB.

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A Regulation A offering is a new issue of:A. $5 million or less during a 12-month period
B. $10 million or less during a 12-month period
C. $10 million or less during a 6-month period
D. $5 million or less during a 6-month period

A. $5 million or less during a 12-month period

Issuers of Regulation A offerings cannot issue more than $5 million in securities over a 12 month period.

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Which of the following transactions would be exempt from SEC registration under the private offering exemption under Section 4(2) of the Securities Act?
A. A company's president receives an offer from his neighbor, a novice investor, to buy 1,000 shares of his company from him, agreeing not to sell the shares on the public market
B. After seeing a mass email sent to an analyst's friends, family and co-workers about buying some of his shares in the company he works for, the analyst's co-worker buys 1,000 shares after agreeing not to sell the shares on the public marketC. The CFO of a small company asks to buy 1,000 shares of the company from the CEO and promises not to resell the shares to the public
D. A secretary buys 1,000 shares of the business she works for at a discounted rate, hoping to make a small profit on the open market

C. The CFO of a small company asks to buy 1,000 shares of the company from the CEO and promises not to resell the shares to the public

Section 4(2) of the Securities Act indicates that "transactions by an issuer not involving any public offering" are exempt from registering with the SEC. This phrase is not defined in any statutes, although the SEC attempts to provide some guidelines on what makes a private transaction with the following: "the purchasers of the securities must: - have enough knowledge and experience in finance and business matters to evaluate the risks and merits of the investment (the 'sophisticated investor'), or be able to bear the investment's economic risk; - have access to the type of information normally provided in a prospectus; and - agree not to resell or distribute the securities to the public. In addition, you may not use any form of public solicitation or general advertising in connection with the offering."In the examples above, the transaction with the CFO is the only one that meets all of the qualifications as it is assumed he or she is a sophisticated investor, he or she would have access to the company's financial state as a CFO and he or she has agreed not to resell the securities to the public. The other examples miss at least one of the qualifications.

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FINRA Rule 2262

Disclosure of control relationship:

provides that a member in a control relationship with the issuer must disclose that relationship to a customer before engaging in a transaction with that customer for the issuer's securities.

FINRA Rule 2269

requires the disclosure of any interest the broker-dealer has in the issuer's distributions before engaging in an agency cross transaction, or in a principal transaction if the broker-dealer receives compensation for investment advice. However, the rule only requires the disclosure of current interest - past interest would likely be immaterial information. Disclosing material, non-public information or the identity of a client to a customer would be disallowed as a breach of confidentiality.

Section 4(2) of the Securities Act

Indicates that "transactions by an issuer not involving any public offering" are exempt from registering with the SEC. This phrase is not defined in any statutes, although the SEC attempts to provide some guidelines on what makes a private transaction with the following:

"the purchasers of the securities must:

1. have enough knowledge and experience in finance and business matters to evaluate the risks and merits of the investment (the 'sophisticated investor'),

or

2. be able to bear the investment's economic risk; - have access to the type of information normally provided in a prospectus; and - agree not to resell or distribute the securities to the public.

In addition, you may not use any form of public solicitation or general advertising in connection with the offering.

Regarding a private placement, the placement agent’s fees are designated in the following TWO documents:

prohibits a participant in the distribution of a security from purchasing the security during the "Restricted Period"

Actively Traded Securities

1. ave daily trading vol >= $1mm

2. public float >= $150mm

Which of the following is true of a Reg A offering?
A. Sales by insiders are limited to $5mm in a 12-month periodB. The issuer may publish advertisements concerning a proposed offering before an offering statement is filed with the SEC
C. Sales may be made any time after offering statement is filed with SEC
D. The issuer must be organized in the United States or its territories

B. The issuer may publish advertisements concerning a proposed offering before an offering statement is filed with the SEC

Reg A exempts offerings of <=$5mm from registration. Certain requirements.
1-limits insider sales to $1.5mm
2-file offering stmnt w/ SEC
3-sale may not be made until offering stmnt is qualified by SEC (~20days)
4-only avail to US or Canadian issuers
5-issuer may publish advertisements concerning a proposed offering before an offering stmnet is files w/ SEC

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Reg M, Rule 102
Actively Traded Securities

ADTV >= $1mm

On which form would a US domestic issuer report sales of its equity securities that are made in reliance upon the Regulation S safe harbor?A. Form 10-Q
B. Form F-1
C. Form S-1
D. Form D

A. Form 10-Q

Regulation S is a safe harbor exemption for offer to sell and sales that occur outside of the US. There is no specific form (similar to Form D) that an issuer must use if relying upon Regulation S to make sales of its securities outside of the US, to non-US persons. However, a US issuer that does offer/sell its securities by relying upon Regulation S would include information related to those sales in its Form 10-Q filing so that the general public in the US would have notice of such sales.

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Syndicate accounts need to be finalized and closed within _____________ days of the syndicate settlement date. Final settlement includes an itemized statement of syndicate expenses that will be ___________________________.
A. 30, borne by the lead underwriter
B. 90, borne by the lead underwriterC. 90, divided among the syndicate members on a pro-rata basis
D. 30, divided among the syndicate members on a pro-rata basis

C. 90, divided among the syndicate members on a pro-rata basis

Syndicate accounts have a special settlement date. Syndicates are groups of underwriters that help issuers sell and distribute their securities in a primary public offering. The syndicate settlement date is the date when the issuer delivers the securities to the syndicate members. The manager of the syndicate account must finalize the syndicate accounts with the other syndicate members within 90 days following the syndicate settlement date. The final settlement includes an itemized statement of syndicate expenses to add to the purchase price of the new issue. These expenses will be divided on a pro-rata basis among the syndicate members.

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Research Analyst

Associated person who is primarily responsible for, and any associated person who reports directly or indirectly to such a research analyst in connection with, preparation of the substance of a research report, whether or not any such person has the job title of "research analyst."

Who removes the restriction from private placement securities?
A. the stock exchange where it will be traded
B. FINRA
C. the SECD. the issuer

D. the issuer

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An issuer may file a Form S-4 to register securities
A. Once the issuer has been continuously reporting for a minimum of 3 years
B. If it is registering securities involving a real estate investment trust
C. In connection with an exchange offer involving a foreign private issuerD. In connection with a business combination

D. In connection with a business combination

The S-4 is filed by the acquirer when the acquirer issues securities to pay for a business combination, such as a merger. The S-4 form is used to file the registration statement/prospectus for these new securities. These securities may be equity or debt. Form S-2 is used for an issuer who has been continuously reporting for a minimum of 3 years. Form S-11 is used for securities involving REITs. Form F-4 is used for foreign private issuers conducting a business combination or exchange offer. Form S-8 is used for securities offered to employees through an employee benefit plan.

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A trust account wants to buy shares of an initial equity public offering. A "restricted person" under FINRA Rule 5130 owns a 5% beneficial interest in the trust account. Your response is:
A. Shares can only be sold if the shares are held in escrow
B. Under no circumstances can shares in the offering be sold to the accountC. Shares can be sold because the "restricted person" owns a beneficial interest of less than 10%
D. Shares can be sold after notice and approval by FINRA and the SEC

C. Shares can be sold because the "restricted person" owns a beneficial interest of less than 10%

The general prohibitions of Rule 5130 do not apply to sales to and purchases by "an account if the beneficial interests of restricted persons do not exceed in the aggregate 10% of such account."

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What is the syndicate settlement date?
A. Three business days after the security opens for trading
B. The date at which the distribution of securities in an offering ends
C. The date at which the underwriting agreement is signedD. The date at which the securities are delivered from the issuer to the underwriters

D. The date at which the securities are delivered from the issuer to the underwriters

Syndicate accounts have a special settlement date. Syndicates are groups of underwriters that help issuers sell and distribute their securities in a primary public offering. The syndicate settlement date is the date when the issuer delivers the securities to the syndicate members. The manager of the syndicate account must finalize the syndicate accounts with the other syndicate members within 90 days following the syndicate settlement date. The final settlement includes an itemized statement of syndicate expenses to add to the purchase price of the new issue. These expenses will be divided on a pro-rata basis among the syndicate members.

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When does a syndicate account have to be finalized and closed?
A. Within 30 days from the last security being sold at the public offering price
B. No official dateC. Within 90 days from the syndicate settlement date
D. Within 30 days from the public offering date

C. Within 90 days from the syndicate settlement date

Syndicate accounts have a special settlement date. Syndicates are groups of underwriters that help issuers sell and distribute their securities in a primary public offering. The syndicate settlement date is the date when the issuer delivers the securities to the syndicate members. The manager of the syndicate account must finalize the syndicate accounts with the other syndicate members within 90 days following the syndicate settlement date. The final settlement includes an itemized statement of syndicate expenses to add to the purchase price of the new issue. These expenses will be divided on a pro-rata basis among the syndicate members.

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When must the lead underwriter of an IPO notify NASDAQ of the issuer's public offering price?
A. At least one hour before market opening on the day trading in the IPO stock will beginB. By 6:45 PM (Eastern Time) the day before trading in the IPO sock will begin
C. By 4:30 PM (Eastern Time) the day before trading in the IPO stock will begin
D. By 9:30 AM (Eastern Time) on the day that trading in the IPO stock will begin

B. By 6:45 PM (Eastern Time) the day before trading in the IPO sock will begin

The lead underwriter of an IPO must notify NASDAQ of the issuer's public offering price the day before trading in the stock begins by 6:45 PM (Eastern Time). The stock begins trading on NASDAQ at the public offering price.

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Before completing a new issue, underwriters convey information about the new issue to brokers interested in selling the issue. This formal process is known as:
A. A New Issue Forum
B. A Syndicate Review
C. Underwriting PresentationD. Due Diligence Meeting

D. Due Diligence Meeting

The formal process where underwriters convey information about a new issue to brokers interested in selling the issue is called the due diligence meeting. At the meeting, underwriters and others involved in the issue may ask questions of the management of the issuer to ensure that all disclosure responsibilities and due diligence duties are met.

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A securities record includes which of the following pieces of information?
I. The long and short positions held by the broker-dealer and its customers in each security
II. Securities failed to receive and failed to deliver
III. Securities in transfer
IV. The owner and physical location of each security held by the broker-dealerA. I and IV
B. II and III
C. II and IV
D. I, II, III, and IV

A. I and IV

A securities record (also known as a stock record) is a record of the owner and physical location of each security held by the broker-dealer. The record also includes the long and short positions held by the broker-dealer and its customers in each security. While securities in transfer and securities failed to receive and failed to deliver are required records, they are generally included in a ledger, rather than a securities record.

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NASDAQ lists quotations on all of the following types of securities except:
A. NASDAQ lists quotations for all of the choices
B. Securities with at least three market makers at the time of the initial listingC. Securities with at least 750,000 publicly held shares at the time of initial listing
D. Securities that have a minimum bid price of $4 at the time of initial listing

C. Securities with at least 750,000 publicly held shares at the time of initial listing

Among other requirements to be listed on NASDAQ, at the time of listing the securities must have at least three market makers and at least 1 million publicly held shares. A security must also either have a minimum bid price of $4 at the time of initial listing, or it must satisfy an alternative set of standards and have a specified minimum closing price at the time of initial listing.

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Which of the following would NOT be considered "General Solicitation" as defined under Regulation D?
A. Holding a seminar open to the public
B. Media advertisingC. Issuer soliciting business contacts and relatives
D. Mass mailing-such as a mailing to a list of doctors

C. Issuer soliciting business contacts and relatives

Rule 502 of Regulation D states "neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising, including, but not limited to: 1) Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; and 2) Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising."An issuer soliciting business contacts and relatives is the correct answer because the Issuer, specifically its executives, can solicit business contacts and relatives. This type of financing is typically the first round of money a start up company raises and is typically referred to as "friends and family."

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Which of the following could be considered a "free writing prospectus?"
I. a live powerpoint presentation
II. a powerpoint presentation handout with a legend that advises investors to read the preliminary prospectus and instructions on how to obtain it
III. a story about an issuer of an offering in a newspaper
A. I
B. IIC. II and III
D. I, II, and III

C. II and III

A free writing prospectus is any written communication other than a final prospectus or preliminary prospectus that constitutes an offer to sell or a solicitation of an offer to buy securities in a registered offering. A free writing prospectus is used after the registration statement has been filed unless the issuer is a well known seasoned issuer (WKSI). A WKSI may communicate using a free writing prospectus at any time prior to or following the filing of the registration statement. A live Powerpoint presentation is not considered a free writing prospectus because it is not considered written or graphic communication. Interestingly, email blasts, web postings, and Powerpoint handouts are considered written or graphic communication. The communication must contain a legend that directs investors to the preliminary prospectus and advises them to read it. A story reported by the media about an issuer can also be considered a free writing prospectus. Rule 433 (f) exempts the media from the legend requirements. Free writing prospectuses must be filed with the SEC on or before the first day of use. Rule 433 (d). Issuers must file media stories with the SEC within four days of becoming aware of them. Moreover, non-reporting and unseasoned issuers must include a preliminary prospectus with the free writing prospectus. Rule 433(b)(2)

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If securities are purchased pursuant to a stand-by agreement, those securities may not be transferred for how long after the offering?
A. One month
B. Two months
C. Two weeksD. Three months

D. Three months

Non-qualified refers to the fact that the principal in an annuity has already been taxed; only the earnings in a non-qualified annuity are taxable upon withdrawal.

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"Non-qualified" with respect to an annuity refers to:A. the after-tax nature of the principal
B. the pre-tax nature of the principal
C. the tax deductibility of the principal
D. none of the choices listed

A. the after-tax nature of the principal

Non-qualified refers to the fact that the principal in an annuity has already been taxed; only the earnings in a non-qualified annuity are taxable upon withdrawal.

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Which type of issuer is generally associated with the Form S-3 registration statement?
A. an investment company
B. a foreign issuerC. a well-known seasoned issuer
D. a well-known super issuer

C. a well-known seasoned issuer

An S-3 form is the most simplified registration form and therefore most desirable to issuers. To file an S-3, issuers must have already issued SEC-registered securities, and must have filed all their SEC-required filings in a timely manner. Issuers that may use the S-3 form are well-known seasoned issuers (as defined in Rule 405) and seasoned issuers. Domestic issuers that are issuing securities for the first time in an Initial Public Offering must always file an S-1. Foreign issuers typically file either a F-1 or a F-3 depending on their characteristics.

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Which of the following statements regarding syndicate transactions is true?
A. The syndicate may short shares of an initial public offering without making any disclosure about syndicate covering transactions in the prospectus
B. The syndicate may make "covered" short transactions, but may not make "naked" short transactionsC. The syndicate may short shares of an initial public offering if the possibility of engaging in short covering transactions was disclosed in the prospectus
D. The syndicate may never short shares of an initial public offering

C. The syndicate may short shares of an initial public offering if the possibility of engaging in short covering transactions was disclosed in the prospectus

Within the context of an over allotment or a green shoe option, the syndicate may short shares of an initial public offering if the possibility of engaging in short covering transactions was disclosed in the prospectus. The syndicate generally shorts shares if there is a strong possibility that there will not be sufficient demand for the offering. The syndicate will short shares and then buy them back on the open market at the fixed offering price to help stabilize the market price of the stock.

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Which of the following are true about stabilizing bids?
I. Prior notice must be given to the SRO with the regulatory authority over the principal market where the transaction will be effected
II. Prior notice does not need to be given to the SRO with the regulatory authority over the principal market where the transaction will be effected
III. The stabilizing bid must be identified as a stabilizing bid
IV. The stabilizing bid need not be identified as a stabilizing bidA. I and III
B. I and IV
C. II and III
D. II and IV

A. I and III

Before making a stabilizing bid, prior notice must be given to the SRO with the regulatory authority over the principal market where the transaction will be effected. Prior notice must also be given to the market where the stabilizing bid will be made. The stabilizing bid must be identified as a stabilizing bid. Advance disclosure of the possibility of stabilizing bids must be given to purchasers. This disclosure is usually presented in the prospectus.

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All of the following are considered institutional investors EXCEPT?
A. an investment adviser registered with the SEC
B. a registered investment company
C. a bankD. an entity with $25 million or more in assets

D. an entity with $25 million or more in assets

An institutional investor is defined as a bank, savings and loan association, insurance company, or registered investment company. An institutional adviser registered with the SEC or a state securities commission is also considered an institutional client. An entity with $50 million or more in total assets is also considered an institutional investor.

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Before allowing a customer to buy shares in an IPO, the member firm must receive a representation that the account is not restricted by the account owner. How can this form be obtained initially?
I. negative consent letter
II. positive affirmation letter

A. Either I or II
B. I
C. Neither I nor IID. II

D. II

Before allowing a customer to buy shares in an IPO, the member firm must receive a representation declaring that the account is not restricted by the account owner. The firm must receive a positive affirmation letter in which the customer states in writing that the account is not restricted. After the initial verification is obtained, annual verifications may be obtained through a negative consent letter. A negative consent letter is a letter that states that the person is not restricted unless they inform the firm otherwise.

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Working capital

Working capital is defined as current assets - current liabilities

M1

M1 is the narrowest measure of the money supply that is tracked by economists. It includes notes and coins in circulation as well as funds that can be spent immediately such as checking and other accounts against which checks can be written (called "demand deposits"). M1 also includes traveler's checks.

Mega Equity buys big stakes in publicly traded companies that it believes are undervalued and then it works to get the companies to improve profitability and distribute cash to shareholders. When Mega Equity acquires shares in a company, a Schedule _____ must be filed with the SEC within _____ days of Mega's having attained a greater than _____% position in a company's securities.
A. 13G, 5, 10
B. 13G, 10, 5C. 13D, 10, 5
D. 13D, 5, 10

C. 13D, 10, 5

Per the Securities Exchange Act of 1934, a Schedule 13D must be filed with the Securities and Exchange Commission within 10 days of an entity attaining a greater than 5% position in any class of a company's securities. Schedule 13G would not be appropriate since Mega aims to exert control and 13G is for passive investors.

The federal funds rate is the interest rate that banks in the US pay when they borrow money overnight from other banks via their reserve balances at the Federal Reserve. The discount rate is the interest rate that the Federal Reserve charges banks to borrow money on a short-term basis. The discount rate is usually higher than the federal funds rate, and thus banks borrow from the Federal Reserve at the discount window only when they have to, typically in an emergency, such as, for example when a bank's reserve deposits drop below the amount required by the Federal Reserve, or when the monetary system is experiencing a liquidity crisis. Historically, the discount rate has been 25 to 100 basis points (.25% to 1%) above the federal funds rate.The prime rate is the primary interest rate benchmark for short and medium term loans in the US. Historically, called the "prime lending rate," it was what a bank would charge its most credit-worthy customers. The prime rate or simply "prime," is determined by a Wall Street Journal survey of the ten largest US banks, however, a rule of thumb is that the prime rate can be derived by adding 300 basis points (3%) to the federal funds rate. To "trade on margin" and borrow funds to buy securities, the customer must pay the broker interest, this rate is called the margin rate. To get the money to loan to the customer, the broker borrows from a bank; the interest rate that the bank charges the broker is called the broker call rate. The broker call rate is typically lower than the prime rate but not as low as the discount or the federal funds rates. The margin rate that the broker charges the customer is typically the broker call rate plus some additional percentage or fee to compensate the broker for its role and risk.

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Which of the following are true of selling concessions paid to brokers engaged in investment banking for services rendered in a distribution:
I. Selling concessions may be paid in connection with a fixed price offering.
II. Discounts or other allowances may be paid in connection with fixed price offerings.
A. None of the other choicesB. I and II
C. II only
D. I only

B. I and II

Under FINRA Rule 5141, selling concessions, discounts and other allowances may be paid in conjunction with fixed priced offerings to a broker or dealer who is in the investment banking industry for services rendered. Note that selling concessions and discounts may not be paid to other parties who are not part of the selling syndicate or selling group.

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NewCo has been a reporting company for three months, and has a public float of $80 million. Which of the following are true of NewCo company?A. It must file its 10-K within 90 days of the end of its fiscal year
B. It must file its 10-Q within 40 days of the end of its fiscal quarter
C. It is considered an accelerated filer
D. It must file its 10-K within 75 days of the end of its fiscal year

A. It must file its 10-K within 90 days of the end of its fiscal year

An accelerated filer is a company that has been a reporting company for at least 12 months, has filed at least one annual report, and has a public float of between $75 million to $700 million (as measured on the last day of the company's second fiscal quarter). An accelerated filer must file its 10-K within 75 days of the end of its fiscal year. If a company has all the qualities above, but has a public float of at least $700 million, it is a large accelerated filer. A large accelerated filer must file its 10-K within 60 days of the end of its fiscal year. Both accelerated filers and large accelerated filers are required to file their 10-Qs within 40 days after the end of the fiscal quarter. NewCo would be considered a regular filer because it has only been a reporting company for three months. Regular filers must file their 10-Ks within 90 days of the end of their fiscal year, and their 10-Qs within 45 days of the end of their fiscal quarter.

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FINRA Rule 5121 prohibits the distribution of a public offering by a member with a conflict of interest unless there is prominent disclosure of the nature of the conflict of interest in the prospectus, offering circular or similar document for the public offering and which of the following conditions?
A. The securities offered have a bona fide public market
B. A qualified independent underwriter participates in the offering in a significant manner
C. The securities offered are investment grade ratedD. Any of the choices would suffice

D. Any of the choices would suffice

FINRA Rule 5121 prohibits a member firm with a conflict of interest from participating in a public offering unless the nature of the conflict of interest is prominently disclosed and one of the following is the case:1) A qualified independent underwriter (QIU) participates in the offering which requires that:- the name and role of QIU be disclosed- the QIU participates in preparing the registration statement, offering circular, or prospectus- the QIU assists in the distribution of the offering- Note: the QIU is no longer required to assist in pricing2) the member firm(s) primarily responsible for managing the offering does not itself have a conflict (and is not an affiliate of a firm with a conflict)3) the offered securities are exchange-listed and satisfy the requirements for a bona fide public market4) the offered securities are investment grade rated by a nationally recognized statistical rating organization

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XYZ Corporation is about to issue new shares in a follow-on offering. ABC Investment bank is the underwriter on the issue. ABC Investment Bank will not be a passive market maker on the new issue. XYZ Corporation has a public float of $75 million and an ADTV of $300,000. Which of the following is true?
A. Affiliates of XYZ cannot purchase shares of XYZ from five days prior to the pricing until their participation ends
B. Affiliates of XYZ cannot purchase shares of XYZ from five days prior to the pricing until the effective date
C. Affiliates of XYZ can purchase shares of XYZ because XYZ is exempt from Rule 102D. Affiliates of XYZ cannot purchase shares of XYZ from one day prior to the pricing until their participation ends

D. Affiliates of XYZ cannot purchase shares of XYZ from one day prior to the pricing until their participation ends

Affiliates of XYZ cannot purchase shares of XYZ during the restricted period for one day prior to the pricing until their participation ends. Affiliates of XYZ are restricted in this way because XYZ has a public float of at least $25 million and an ADTV of at least $100,000.

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Which of the following is true of the tax consequences of a spin-off?
A. A spin-off can be made tax-free to the parent.B. A spin-off can be made tax-free to the parent.
C. A tax-free spin-off can be made for companies in business at least one year.
D. A tax-free spin-off only benefits the receiving shareholder.

B. A spin-off can be made tax-free to the parent.

The company must be in business for at least five years to take advantage of the tax-free spin-off. The SEC requires at least three years of audited financials. Spin-offs benefit the receiving shareholder and parent from a tax perspective.The SEC requires at least one year's worth of audited financials for the spin-off to be tax free.

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Which of the following types of reorganizations would result in a tax-free (tax-deferred for Target shareholders) transaction under Internal Revenue Code 368?
I. A forward triangular merger in which 100% of the consideration is in stock.
II. A forward triangular merger in which 100% of the consideration is in cash
III. A reverse triangular merger in which 100% of the consideration is in stock
IV. A reverse triangular merger in which 100% of the consideration is in cashA. I and III
B. II and IV
C. III and IV
D. I and II

A. I and III

A forward triangular merger is a merger in which the buyer sets up a shell subsidiary and the target merges into the subsidiary. Forward triangular mergers where 100% of the consideration is paid in stock are considered tax-free to the target shareholders. Eventually the target shareholders will have to pay taxes on their gains, but only when they sell their new stock. Forward triangular mergers qualify for tax advantages even when part of the consideration is in cash. As long as the consideration is not more than 50% cash (more than 50% of the voting shares have to be purchased with stock), the merger qualifies as a Section 368 tax-free reorganization, and target shareholders only have to pay taxes on the cash portion.

In contrast, a reverse triangular merger is a merger in which the buyer sets up a shell subsidiary which mergers into the target prior to the target being acquired by the buyer. Reverse triangular mergers where 100% of the consideration to the target shareholders is paid in stock are considered tax-free to the target shareholders. Eventually the target shareholders will have to pay taxes on their gains, but only when they sell their new stock. Reverse triangular mergers provide tax advantages for target shareholders even when part of the consideration is in cash. As long as the consideration is not more than 20% cash (more than 80% of the voting shares have to be purchased with buyer stock), the merger qualifies as a Section 368 tax-free reorganization, and target shareholders only have to pay taxes on the cash portion.

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During an acquisition, many acquirers and targets choose to take an 338(h)(10) election. All of the following are true of a 338(h)(10) election EXCEPT?
A. Stock sales are treated as asset sales for tax purposes.
B. Purchaser must make a qualified stock purchase.C. Target must be a C corporation.
D. Both the buyer and the seller must agree to the election.

C. Target must be a C corporation.

An Internal Revenue Code 338(h)(10) election is set up for purchasers of S corporations or subsidiaries who make a qualified stock purchase. The election allows the purchaser and seller to treat a stock sale like an asset sale for tax purposes. Both the purchaser and the seller must agree to take the election.

(this multiple choice question has been scrambled)

All of the following offices would need to be registered as an office of supervisory jurisdiction except:
A. The office is the main office where no solicitation of orders occurs
B. The office structures private placements onlyC. The office solicits orders by phone and faxes them to another office for review
D. The office maintains custody of customer's funds and securities, but does not solicit orders

C. The office solicits orders by phone and faxes them to another office for review

An Office of Supervisory Jurisdiction (OSJ) is an office where one or more of the following activities occur:
-Order execution and/or market making
-Structuring of public offerings or private placements
-Maintaining custody of customers' funds and/or securities
-Review and endorsement of customer orders
-Final approval of new accounts
-Final approval of retail communications other than research reports
-Supervision of persons at branch offices
-The main office is always considered an OSJ
There must be at least one registered principal that is responsible for each OSJ and a registered rep or principal for each non-OSJ branch office.